Bill sponsor received $8,000 in campaign donations from the North Carolina Automobile Dealers Association

Living in the Research Triangle Park (RTP) area of North Carolina, which I nickname Silicon Valley East, I quite frequently see Tesla Model S sedans and Roadsters silently cruising down city streets and interstates. However, the North Carolina Senate Commerce Committee unanimously approved a measure that would make it illegal for Tesla Motors to sell vehicles directly to customers without the ever-present "middleman" in new car transactions: car dealerships.

Not surprisingly, the NC Automobile Dealers Association (which represents North Carolina's franchised car dealership) is behind this latest stab at Tesla. But according to NC ADA President Robert Glasser, this isn't an attack specifically aimed at Tesla. Glasser notes that the precedent Tesla has set for direct sales could set into motion a chain of events that would topple the entire dealership model of business.

“We care about the franchise system,” said Glaser. “The whole point of the retail system is to protect the consumer.”

Of course, Tesla Motors sees things quite differently. “They’re trying to insulate the dealer franchise model from any competition,” said Diarmuid O’Connell, Tesla’s VP of Corporate and Business Development. “It’s a protectionist move to lock down the market so we have to go through the middleman – the dealer – to sell our cars.”

And here's an interesting tidbit that shines a whole new light on the story. Slate reports that Sen. Tom Apodaca, the Republican sponsor of the bill, received $8,000 in campaign donations (the maximum allowed by state law) from the NC ADA.

It's pretty clear to see why dealerships are shaking in their boots at the prospect of Tesla (and other auto manufacturers) selling directly to customers. Tesla managed to deliver a whopping 4,750 Model S sedans to customers during the month of April. Compared to other luxury sedans that also dance in the $70,000 to $100,000+ price range, the Model S outpaced monthly sales of the Audi A8 (1,462 units), BMW 7-Series (2,338), Lexus LS (2,860) and Mercedes S Class (3,077).

Tesla Model S

Tesla has sold 80 Model S sedans in North Carolina and has an additional 60 orders in queue from residents. The overwhelming majority of those sales have come via the internet.

And one could argue that an electric vehicle like the Model S needs less attention from dealerships due to the much lower maintenance needs of the electric motor and battery pack. Quite simply, there is potentially less to go wrong with a Model S compared to BMW 750i with its twin-turbocharged V8 and 8-speed automatic transmission.

Despite this new speed bump in Tesla's road to electric vehicle proliferation, the company has been showered with a wealth of good news in the past week. Last week, Tesla reported its first profit in its ten years of existence and Consumer Reports gave the Model S a near perfect rating: 99 out of 100 possible points.

Tesla's stock is up 57 percent since its quarterly earnings were released last Thursday to just under $90/share.

Uh-huh. Then why is the same not true of everything else you can buy from a manufacturer directly?

Answer: because it's a lie to start with.

If Tesla, for example, did such a thing then consumers would buy cars from someone else.

And if all the manufacturers got together and did it all in unison, that's collusion and price-fixing, and illegal as f%ck.

Think of all the other things you can buy directly from a manufacturer...including, as pointed out, a new house - probably the biggest purchase you'll ever make...and now try to rationalize that argument.

Oh, well, point me to a dealership where I can buy a Camero ZL1 for retail. Nevermind anything reasonable above what they charge, I'm just asking for retail. Nope. All dealers charge $5k to $7 over and above the retail price.

I'm not familiar with the ZL1 myself, but I assume it's a limited-edition unit that's in higher demand than there's supply.

Ergo...price goes up. Same thing happens to any item that has limited supply and high demand. Not just cars.

Regardless, as you noted, that's happening from the *dealerships* now. And it's perfectly legal...they can legitimately get more for the car because it's in such high demand and limited supply. There's not a legal issue there.

Reclaimer,I don't get your logic. It's clear the law is wrong, so the answer isn't to screw "yet one more manufacter". The answer is to fix it for everyone, not keep on screwing anyone else that comes along. We, the consumers, are getting hurt by this.

Frankly, this is government getting involved in our lives and I can't believe you aren't screaming about it.

To be honest I have no idea what goes on between dealerships and manufactures on the business side and if it's beneficial to both. For me to arbitrarily weigh in on that would be speaking from ignorance.

I'm merely stating that the law should either be repealed, or applied equally. I'm not in a favor of granting Tesla a special exemption. That's all I'm saying.

quote: Frankly, this is government getting involved in our lives and I can't believe you aren't screaming about it.

Yeah well if I screamed every time the Government got involved in our lives I would be like one of these crazy guys with a zillion posts on some Internet blog or...

I bought the very first Nissan GT-R in Houston in 2008 for MSRP, a car that had way more appeal and demand than the ZL1. Sure, most people paid over sticker at first, but I didn't because I shopped around and scored a deal. That is how the free market works. If everyone just settled and bought products for the price they were told then the free market would fail, but consumers care about price and do shop around and price rises and falls accordingly.

Th ZL1 is a specialty car, if that dealer was able to mark up ALL of their inventory then obviously something would be amiss. It is not a monopoly when one product is prices over the suggested retail price, it is the market correcting itself. If dealers can sell the ZL for that markup it is because that is what buyers are willing to pay because it has high demand and a low supply.

quote: Uh-huh. Then why is the same not true of everything else you can buy from a manufacturer directly?

Do you actually buy anything direct from the manufacturer? We go to the grocery store which is a middle man. We go to Walmart or Target which is a middle man. We go to the gas station which is usually franchised and a middle man. We go to the motorcycle shop and they sell all brands and they are a middle man. We purchase phones from AT&T, T-Mobile, Verizon, etc and they are all middle man. We purchase clothing from Nordstrom and Macy's. We use middle man everyday and we choose which middle man to use based on service, pricing, and convenience. Even with the newer stores like Gap, J.Crew, Express, American Eagle, etc. there is still direct competition that are middle man and these stores are fairly new. In the past J.Crew sold from catalog and didn't own stores.

quote: Think of all the other things you can buy directly from a manufacturer...including, as pointed out, a new house - probably the biggest purchase you'll ever make...and now try to rationalize that argument.

To compare cars to houses, do houses get built out of state and then shipped in to be sold? Are there any housing companies that sell houses in all 50 states? When you go looking for a house do you have competition and choice or it is all one type of house sold in different colors for the same price? Housing is different, however it is only one of the few items you can purchase direct from the manufacturer.

quote: Doesn't work.

If it doesn't work, then why did Elon say he was willing to go with the franchise model once he started to produce more mainstream vehicles?

The better question is if the franchise system for cars is outdated? Would it be more convenient if you could buy a new car from one lot that had all brands? Or direct mail order from the manufacturer? It would be, however that doesn't mean the franchise system is bad.

I buy fruits and veggies from the farmers. They also deliver my milk and eggs. Now I didnt buy the milk and eggs directly from the chicken and cows, so I guess you could say the farmer is the "middle man".

My metal frame building was ordered straight from the manufacturer(out of state), shipped to my farm and then I had it errected. There's a living space inside of it too. You wouldnt notice the difference between my living room and one in a regular house except maybe the fals ceiling.

More and more houses are being prefabbed in sections and transported to the build sites.

I've bought several items online direct from the manufacturer. so yeah it's not unheard of or rare as you say.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer